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It would make great financial sense to use equity in your home to consolidate debt. Depending on your financial goals it could be just the thing to do if you are looking to:

• Decrease your total monthly payment amount
• Make debt tax deductible
• Pay off credit card debt
• Consolidate many small payments into one bigger payment
• Reduce interest rate if your debt is high interest

There are a several ways to access your home equity to consolidate debt:

• Cash out refinancing
• Home equity Loan
• Home equity line of credit

When you are refinancing to cash out, you are essentially refinancing to a loan more than you currently owe and taking the difference in cash. Depending on your current interest rate, you could be able to lower your payment and pay off other debt with the cash. It is possible to decrease your overall monthly payments with a cash out refinance.

A home equity loan is a second loan to get into your home equity. Also referred to as a second mortgage, a home equity loan lets you get cash for your equity without refinancing your first mortgage and usually takes less time.

Home equity line of credit is somewhat similar to a credit card but it uses your equity as the revolving line of credit. You pay only when you take the money. You can get a home equity line of credit in a very short period of time, even couple of weeks.

When you use the home equity in your house to consolidate debt, you do not decrease the amount or your debt. You actually lower the interest rate you pay. It is important to not jack up your credit card again. It could be a good idea to close your credit card accounts and keep one only when you really need it. You could increase your monthly cash flow by consolidating, but think about saving as well.

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